Conference
2015 - Resources Kit
Portfolio construction is
approaching a crossroads – and critical questions must be answered. For
starters, is the developed world’s 35-year (some say, 100-year)
investment supercycle exhausted, heralding in an investment regime the
likes of which most of us have never experienced in our careers? Or, is
reinflation underway, signalling a return to higher rates and strong
asset price growth and returns instead? Will active or passive
strategies therefore be more appropriate? Complicating things further,
what were only emerging megatrends early last decade have now become
entrenched, causing massive structural change and further portfolio
construction dilemmas. Critical decisions must now be made.
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Quicklinks |
This online Resources Kit is a key feature of the Conference 2015
program (in fact, all our programs feature an online Resources Kit). It
enables all Members (whether or not they were part of the "studio
audience" at the onstage program) to "attend" Conference 2015. It's an
invaluable set of continuing education material.
This Resources Kit includes all the videos, podcasts, slides and papers
for each session, along with a link to the delegate Workbook, and the
Backgrounder.
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Session titles |
An overview list of all the sessions from the
jam-packed program. |
Faculty of speakers |
The 35+ leading investment professionals who comprised the Conference
2015 faculty.
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Session
resources |
Videos, podcasts, slides and papers for all sessions.
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Resources Kit Workbook |
Print it and track sessions as you "attend".
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Sessions |
Wednesday 19 August 2015
Thursday 20 August 2015 |
Faculty of speakers |
Conference 2015 features a carefully selected faculty of more
than 35 international and local portfolio construction experts
offering their best high conviction ideas about the markets,
strategies and investing - and of course, the implications for
portfolios.
Critical Issues Forum faculty (in order
of appearance)
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Graham Rich, Managing Partner & Publisher,
PortfolioConstruction Forum (Sydney)
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Hamish Douglass,
CEO, CIO & Lead Portfolio Manager, Magellan Financial Group
(Sydney)
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Brett Lewthwaite, Head of Fixed Income and Currency,
Macquarie Investment Management (Sydney)
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Tony
Crescenzi, VP, Market Strategist & Portfolio Manager, PIMCO
(Newport Beach)
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Chris Watling, CEO & Chief Market Strategist, Longview
Economics (London)
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Prof. Charles Sampford, Foundation Dean, Prof of Law &
Research Prof in Ethics, Griffith University (Brisbane)
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Tim Farrelly, Principal, farrelly's Investment Strategy
(Sydney)
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Saul Eslake, Independent Economist (Hobart)
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Moshe A. Milevsky, Ph.D., Exec Dir of The IFID Centre &
Assoc Professor at York University (Toronto)
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Horace "Woody" Brock, Ph.D., President, Strategic
Economic Decisions (Boston)
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Marko Papic, Chief Geopolitical Strategist, BCA Research
(Montreal)
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Jonathan Pain, Author, The Pain Report (Sydney)
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Matthew Kelley, Vice President Corporate Strategy,
Affiliated Managers Group(Boston)
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Michael Edesess, Ph.D., Chief Strategist of Compendium
Finance & Research Assoc at EDHEC-Risk Institute (HK)
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Ido Eisenberg, Portfolio Manager, J.P. Morgan Asset
Management (London)
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Robert Lovelace, President, Capital Research &
Management Co (Los Angeles)
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Rob van Bommel, MD & Portfolio Manager, Robeco
(Rotterdam)
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Ian Haas, CFA, Head of Quantitative and Directional
Strategy Research, Neuberger Berman (New York)
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Michael Furey, Managing Director, Delta Research &
Advisory
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Michael Kitces, Partner & Head of Research, Pinnacle
Advisory (Washington, DC)
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Dan Farley, CIO Investment Solutions, State Street
Global Advisors (Boston)
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Dr Joanne Earl, Snr Lecturer and Program Director, UNSW
(Sydney)
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Hon. Wayne Swan, MP, Member for Lilley, Queensland
(Brisbane)
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Kate Howitt, Portfolio Manager, Fidelity Worldwide
Investment (Sydney)
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Kate McCallum, Director & Wealth Adviser, Multiforte
Financial Services (Sydney)
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Rev Graham Long, CEO, The Wayside Chapel (Sydney)
Due Diligence Forum faculty (in order
of appearance)
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Tony
Crescenzi, VP, Market Strategist & Portfolio Manager, PIMCO
(Newport Beach)
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Simon Conn, Senior Portfolio Manager, Investors Mutual
(Sydney)
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David Maywald, Senior Investment Analyst and Portfolio
Manager, RARE Infrastructure (Sydney)
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Tracey McNaughton, Head of Investment Strategy - Au, UBS
Global Asset Management (Sydney)
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Dr Joanne Earl, Snr Lecturer and Program Director, UNSW
(Sydney) - brought to you by Challenger
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Stephen Miller, MD & Portfolio Manager - Asia Pacific
Fixed Income Group, BlackRock (Sydney)
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Paul Drzewucki, Senior Portfolio Manager; Ellerston
Capital (Sydney)
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Sam Churchill, Head of Macro Research, Magellan Asset
Management (Sydney)
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Warryn Robertson, Portfolio Manager/Analyst, Lazard
Asset Management Pacific Co. (Sydney)
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Ashley O’Connor, Investment Strategist, Invesco
Australia (Melbourne)
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Sebastian MacKay, Inv Dir - Multi Asset Portfolio
Management, Standard Life Investments (Edinburgh)
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James Abela, Portfolio Manager, Fidelity Worldwide
Investment (Sydney)
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Andrew Maple-Brown, Head of Global Listed
Infrastructure, Maple-Brown Abbott (Sydney)
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Rob van Bommel, MD & Portfolio Manager, Robeco
(Rotterdam)
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Robert Lovelace, President, Capital Research &
Management Co (Los Angeles)
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Dr Richard Whiteoak, Analyst, Allan Gray Australia
(Sydney)
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Ido Eisenberg, Portfolio Manager, J.P. Morgan Asset
Management (London)
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Jon Shead, Head of Portfolio Strategists Asia Pacific,
State Street Global Advisers (Sydney)
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Ian Haas, CFA, Head of Quantitative and Directional
Strategy Research, Neuberger Berman (New York)
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Don Hamson, Managing Director, Plato Investment
Management (Sydney)
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Wade Matterson, Principal & Senior Consultant, Milliman
(Sydney)
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Session Resources |
Critical Issues Forum 1 |
At the crossroads... Dilemmas |
Decisions
Portfolio
construction is approaching a crossroads – and critical
questions must be answered. For starters, is the developed
world’s 35-year (some say, 100-year) investment supercycle
exhausted, heralding in an investment regime the likes of which
most of us have never experienced in our careers? Or, is
reinflation underway, signalling a return to higher rates and
strong asset price growth and returns instead? Will active or
passive strategies therefore be more appropriate? Complicating
things further, what were only emerging megatrends early last
decade have now become entrenched, causing massive structural
change and further portfolio construction dilemmas. Critical
decisions must now be made.
Graham
Rich, Managing Partner & Publisher, PortfolioConstruction Forum
(Sydney)
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Resources |
Critical Issues Forum 2 |
At the crossroads… The global
outlook - lower for longer, or higher is here? |
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Markets are mispricing the
future level of interest rates
There is a perfect storm supporting low rates
and it may be making investors dangerously
complacent. With the Fed signalling its intention to
raise rates, there is great disagreement about the
quantum of the rises ahead. Rates are likely to go
higher than most expect over the next three years.
The experience of 1994 highlights that increasing US
interest rates can lead to even larger increases in
rates in other credit markets. As this next chapter
unfolds, the impact of these higher rates on
financial markets and portfolio construction will be
significant. With this back-drop, the risk of a
material equity market correction is elevated.
Hamish Douglass, CEO, CIO & Lead Portfolio Manager, Magellan
Financial Group (Sydney)
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Resources |
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"Lower for longer” is the
view of the bulls, not the bears
Imagine that in 2006, someone said that the
credit bubble was about to burst, triggering a
global financial crisis where interest rates would
fall all the way to 0% in many parts of the
developed world, stay there for seven years and be
further and further aided by unconventional monetary
policy easing known as QE. And somewhat surprisingly
markets would enjoy this incredible environment with
asset prices rising higher and higher amidst a
backdrop of relentless optimism. No one would have
believed it, yet it has happened. As it has been
throughout, the common thinking is that higher
interest rates will be good, as they will be a sure
sign that economies are returning to normal. But a
structural shift to higher rates is unlikely to be
simple or seamless and in fact will be far more
challenging and disruptive for economies and markets
than many believe. Indeed, a view that markets will
go on tolerating the unthinkable for far longer is
the more benign, market friendly (almost bullish)
outlook.
Brett Lewthwaite, Head of Fixed
Income and Currency, Macquarie Investment Management (Sydney)
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Resources |
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Panel: The global
outlook - lower for longer, or higher is here?
Tony
Crescenzi, VP, Market Strategist & Portfolio Manager, PIMCO
(Newport Beach)
Hamish Douglass, CEO, CIO & Lead Portfolio Manager,
Magellan Financial Group (Sydney)
Brett
Lewthwaite, Head of Fixed Income and Currency, Macquarie
Investment Management (Sydney)
Chris
Watling, CEO & Chief Market Strategist, Longview Economics
(London)
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Resources |
Critical Issues Forum 3 |
At the crossroads… Decision
making under uncertainty - sensible or senseless?
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At the ethical crossroads –
navigating the values dialogue
Values play a vital role in investment and business
decisions – for individuals, for organisations at
all points in the chain of investment decision
making including those who are increasingly the
ultimate owners through investment advisers,
investment managers and corporate executives. The
view that investors should leave their values at the
door is fundamentally mistaken as both an ethical
theory and an investment strategy. ‘Business as
usual’ means no future business in the future. Just
as the candlestick makers of the 18th century saw
their business give way to the makers of gas and
then electric lights, so many industries will be
find themselves wiped out or left as boutique
reproducers of nostalgia.
Prof.
Charles Sampford, DPhil (Oxon), Foundation Dean and Professor of
Law and Research Professor in Ethics, Griffith University
(Brisbane)
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Resources |
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A clear philosophy is the
best basis for making decisions in time of
uncertainty
We are in unprecedented times - deluged with
information, advice, suggestions. Some good, others
well meant, but hopelessly conflicted. The RBA says
that housing is in a bubble and 30% underpriced?
Banks will be crippled by the impact of a collapse
in housing prices, or that a downturn will hardly
have any impact? Similarly, Conference delegates
often report coming away overwhelmed and unsure of
which aspects of what they've heard they should put
into action and how. Having a clear investment
philosophy based on our own belief set - a living
document that we evolve and sharpen over time - is
the best tool to making decisions under uncertainty.
Tim
Farrelly, Principal, farrelly's Investment Strategy (Sydney)
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Resources |
Due Diligence Forum 1
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Debt - Global
Rising rates - investors can benefit
Asset prices don't move in a straight line and there are
short-term considerations to heed, not the least of which is the
launch of the Fed's rate hike cycle, which could well be
disruptive to many asset classes. Investors can be opportunistic
if they stay mindful of the destination for rates. But, many
investors are facing a dilemma with the perceived risk embedded
in debt markets as Fed lift-off looms. However, reality beckons
- rates will rise and investors can benefit.
Tony
Crescenzi, VP, Market Strategist & Portfolio Manager, PIMCO
(Newport Beach)
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Resources
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Equity - Specialty
- Australian
Small Caps equities are an essential risk diversifier
Investors in the Australian equity markets find
themselves investing in a market that is very concentrated and
therefore carries undue portfolio risk. Small cap exposure adds
diversity in terms of a broader number of sectors to invest in -
therefore providing essential diversity in terms of where
profits and dividends are derived from. Diversity is an
investor’s essential risk management tool. Small caps also
provide access to emerging sectors and stocks. Importantly,
investing in smaller cap sectors and stocks does not have to be
a high risk strategy for investors. The diverse range of quality
small cap companies with recurring earnings and growing dividend
yields offers investors essential risk diversification and
should be incorporated in to an investor’s portfolio.
Simon Conn, Senior Portfolio Manager, Investors Mutual (Sydney)
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Resources
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Equity - Specialty
- Infrastructure
New energy technologies: the "Utility Death Spiral" was hype
Solar power, battery storage, LEDs and other technology
have changed the way that electricity is produced and used.
Consumers and the energy industry are both at a crossroad.
Australia is already a world leader in rooftop solar
penetration. And as costs continue to fall, there will be
greater adoption of the new energy technologies. Customer
choices are impacting different parts of the energy supply
chain, but energy networks themselves are insulated from
emerging technologies.
David Maywald, Senior Investment Analyst and Portfolio Manager,
RARE Infrastructure (Sydney)
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Resources
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Multi-asset
Risk management is as important as return management
Investors need to be more focussed on downside risk
management. An environment of lower expected returns and higher
volatility means risk management is just as important as return
management. We know from behavioural finance theory that all
investors are loss averse - they do not equate equally
volatility on the downside to volatility on the upside.
Achieving sustainable positive absolute returns in a low
expected return world is, in large part, the result of managing
downside risk wisely. In practice, this means being nimble,
flexible and liquid enough to take risk off the table when it is
no longer being rewarded. The result, when successful, is an
asymmetric-return profile.
Tracey McNaughton, Head of Investment Strategy - Australia, UBS
Global Asset Management (Sydney)
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Resources
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Finology
Retirement planning is just a matter of time
Throughout our lives, we encounter people who fail to
plan their families, where they live and their careers – so why
do we expect everyone to plan for retirement? In fact, ABS
statistics suggest that almost 1 million Australians aged 45+
don’t have a retirement plan. Recent research at UNSW indicates
that differences in retirement planning may be related to
people’s preference to focus on the past, present or future –
known as Time Perspective (TP). By understanding our own Time
Perspective and learning to recognise different Time
Perspectives in others, we can better understand and influence
retirement planning behaviour.
Dr Joanne, Snr Lecturer and Program Director, UNSW (Sydney)
- brought to you by Challenger
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Resources
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Due Diligence Forum 2
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Debt - Global
Fixed Income- It's time to jump off the benchmark bus
The US Federal Reserve is (reluctantly) ending a long
period of abnormally low rates. The world’s premier central bank
and its peers have quashed volatility, helped lift asset prices
to great heights and caused us to obsess about monetary policy.
This has potentially profound implications for the way fixed
income portfolios have traditionally been managed. There is some
reasonable concern that traditional approaches involve highly
concentrated risk exposures to the direction of interest rates.
At the same time some ‘spread’ sectors are close to fully
valued. With the aforementioned contemporary dilemmas, investors
should consider flexible benchmark unaware approaches in their
fixed income portfolios, to potentially mitigate adverse market
conditions going forward.
Stephen Miller, MD & Portfolio Manager -
Asia Pacific Fixed Income Group, BlackRock (Sydney)
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Resources
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Equity - Specialty
- Australian
Exploit the structural issues in Australian Equities
Quantitative easing (QE) has driven a search for yield globally,
resulting in a unique Australian experience that has seen the
major ASX indices become increasingly concentrated. The
concentration in the index is mirrored by the concentration of
the Australian funds management industry. The 10 largest
managers account for nearly 50% of the funds managed in
Australian equities creating “market impact” not seen in other
developed markets.
Investors are leaving Australian equity managed funds in record
numbers and the median manager return remains uninspiring at
best. We are at the crossroads for active Australian equity
management. There remains an opportunity for active management,
providing you can exploit these structural issues.
Paul Drzewucki, Senior Portfolio Manager, Ellerston Capital
(Sydney)
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Resources
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Equity - Specialty
- China
China’s property bubble is set to burst!
A credit-fuelled property bubble enabled China to maintain its
incredible run of growth through the global financial crisis (GFC).
However, now China has to deal with a massive excess supply of
property that is causing construction activity to contract along
with a range of other linked sectors in the Chinese economy, as
millions of homes lie vacant. This is unlikely to be ‘just
another property cycle’ in China. Recent stock market volatility
demonstrates that asset price growth expectations can’t be taken
for granted in China, despite intervention from policymakers.
The bursting of China’s property bubble poses a major risk to
both the country’s stability and the global economy – and a
critical dilemma for investors.
Sam Churchill, Head of Macro Research, Magellan Asset Management
(Sydney)
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Resources
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Multi-asset
Active share – winning the game of loans
There are two possible outcomes from the extreme debt
levels in the global economy - high inflation or long-term below
trend growth. These two divergent scenarios create great
uncertainty in investment markets and leave a wide dispersion of
potential outcomes in any investment. The key dilemma is how can
you minimise this uncertainty and return dispersion. By
diverging from benchmarks and emphasising fundamentals,
investors can grow real returns and provide a margin of safety.
Warryn Robertson, Portfolio
Manager/Analyst, Lazard Asset Management Pacific Co. (Sydney)
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Resources
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Alternatives
Alternatives are the answer to your diversification dilemma
During the post-GFC period, unprecedented stimulus
packages have compensated investors regardless of where they’ve
taken on risk. But liquidity-fuelled beta runs are yesterday’s
story and the reality is that we’ve stolen returns from
tomorrow. With traditional asset classes expensive and
historically low yields on bonds compromising their role as a
diversifier, investors are at a crossroads. Rather than
continuing to ride the equity rollercoaster, investors should be
looking for alternative sources of return and genuine
diversification. Furthermore, with the emergence of innovative
solutions that overcome historical limitations around liquidity,
transparency and fees, investors should now be considering
alternatives for a core allocation within portfolios.
Ashley O’Connor, Investment Strategist, Invesco Australia
(Melbourne)
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Resources
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Critical Issues Forum 4 |
At the crossroads... The
Australian economy – recession or “she’ll be right”?
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Australia – recession is
beckoning
With Australia's economic expansion now 94 quarters
old, it has become the second longest expansion
amongst the main developed economies (incorporating
the G10 + Australia) over the past 45 years. Special
one-off factors have underpinned Australia’s record
expansion. A long run-up in household indebtedness,
a strong rise in house prices, a commodity super
cycle and an associated China infrastructure boom
have all combined to extend Australia’s economic
expansion beyond the length of a normal cycle. All
booms/bubbles are sustained by the marginal buyer –
which, in turn, is sustained by cheap (and ever
cheaper) money. Once cheap money begins to be
removed, the boom then typically turns to bust.
Hence, the key to forecasting the next Australian
recession lies in forecasting the end of cheap money
– if correct, then clearly a major investment
crossroad for all Australian residents and
investors.
Chris
Watling, CEO & Chief Market Strategist, Longview Economics
(London)
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Resources |
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An Australian recession -
possible, but not probable
It's been almost 24 years since Australia's
last recession - the longest such period in
Australia's history, and longer than any other
'Western' economy, bar one, has experienced since
the end of World War II. It could be said Australia
is “due for one”. Moreover, every commodities boom
Australia has experienced, prior to the most recent
one, has ended in recession. But this time around,
thanks to the floating A$, an independent Reserve
Bank, and a decentralised wage fixing system,
inflation remained well-contained - so there’s been
no need for the Reserve Bank to implement a
recession-inducing tightening of monetary policy.
Yes, the ongoing fall in commodity prices will
continue to detract from Australia's national
income. The unwillingness of governments to borrow
at near-record low interest rates to fund
infrastructure investment isn't helping. But we are
now experiencing the biggest dwelling construction
boom in our history. The A$ is becoming competitive
again and the impact is already starting to show up.
More jobs are being created in sectors of the
economy benefiting from low interest rates and a
lower A$ than are being lost in mining (and
manufacturing). While it would be foolish to say
that the chances of a recession in Australia are
zero, it's also wrong to say that they are over 50%.
Saul
Eslake, Independent Economist (Hobart)
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Resources
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Critical Issues Forum 5 |
At the crossroads...
Retirement income certainty - is it an oxymoron? |
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A client's life is a mix of
stocks & bonds - allocate around it
Alfred is a public sector employee who works
in Canberra earning $80,000 per year. Bob works for
BHP Billiton in Perth and Cameron works for NAB in
Sydney. All three earn the same salary; have the
same time horizon, investment knowledge and risk
aversion. Should they adopt the same asset
allocation? No. The same idea would apply to the
investment portfolio of an Australian (or Canadian)
resident – with concentrated exposure to natural
resources and financial services – versus an
American or European, for that matter. It is time to
properly account for risk characteristics of
client’s most valuable asset - human capital. This
philosophy has obvious implications for performance
measurement as well, since every client should have
their own personal benchmark accounting for the
interaction of all personal assets and liabilities.
Indeed, this isn’t easy to implement and places
financial advisors in a difficult situation, but
sooner or later everyone will be asking: "What is my
true beta?"
Prof
Moshe A. Milevsky, Ph.D., Exec Dir of The IFID Centre & Assoc
Professor at York University (Toronto)
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Resources
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Critical Issues Forum 6 |
At the crossroads... Alpha &
Smart Beta… fact, fallacy or fantasy? |
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3 fundamental strategies
for outperforming markets and adding alpha
Indexing could prove to be as problematic during the
next few decades as it has been successful in the
past few decades. An average person who put money
into stocks and bonds in the 1980s has reaped
extraordinary returns in the years since. But due to
the mean reversion logic, indexing will yield low
and possibly negative real returns during the
decades ahead. This will heighten the appeal of
active management for those brave enough to pursue
it. The challenge is to identify and engage quality
active managers.
Horace
"Woody" Brock, Ph.D., President, Strategic Economic Decisions
(Boston)
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Resources
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After wasting their
“Goldilocks Era”, EM are at a crossroads
Emerging Market (EM) policymakers have wasted their
commodity-fueled ‘Goldilocks Era’ and are sitting at
a crossroads. Either they make a 180-degree policy
turn away from populism and towards pro-market
thinking, or they will face a bloodbath in the
markets, halls of government, and in the streets.
Unfortunately, the current multipolar world is
fundamentally hostile to developing economies,
imperilling linear forecasts of ever higher returns
for EM assets. Investors should be positioned to
take advantage of structural reforms taking place in
developed markets — especially Europe and Japan —
and ignore the siren call of EM valuations. Without
a dramatic policy shift, EM are a value trap if not
an outright bubble.
Marko
Papic, Chief Geopolitical Strategist, BCA Research (Montreal)
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Resources
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China is a nation at the
crossroads
The reformist credibility of the Chinese government
has been severely damaged by the stock market crash.
Having encouraged a more decisive role for market
forces, following the historic Third Plenum of the
18th Party Congress in November 2013, the government
has failed its first real test. Instead of allowing
the free market to take its natural course, the
government has chosen to put its credibility on the
line by meddling with the market. The unintended
consequences of this intervention could be very
serious for the ongoing transformation of the
world’s most populous nation. The political drama
playing out in Beijing today will have far-reaching
consequences for the global economy - and,
ultimately, the geo-political relationship of China
with its neighbours and the US.
Jonathan Pain, Author, The Pain Report (Sydney)
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Resources
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Critical Issues Forum 7 |
At the crossroads... Alpha &
Smart Beta… fact, fallacy or fantasy? |
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The Boutique Premium –
Boutique investment managers outperform
While the debate over the value of active management
has intensified in recent years, the outperformance
of boutique managers has been overlooked. A
comprehensive study of more than 1,200 investment
management firms and nearly 5,000 institutional
equity strategies comprising approximately $7
trillion in assets under management found that
active boutique managers have consistently
outperformed both non-boutique peers and indices
over the past twenty years. Furthermore, top
boutiques generated exceptional net excess returns.
Core characteristics of boutiques, including their
focused, entrepreneurial cultures and ownership
structures, with principals maintaining significant,
direct equity, position them well to consistently
outperform in return-seeking product categories.
Matthew
Kelley, Vice President Corporate Strategy, Affiliated Managers
Group (Boston)
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Resources
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Smart beta is dumb
Nobelist William Sharpe, speaking at a CFA Institute
Annual Conference last year, said, "When I hear
smart beta, it makes me sick.” And yet, its
popularity has swept not only the ETF universe but
academia too. Hundreds of academic papers have been
published about the "factors" that underlie smart
beta strategies and many ‘smart beta’ investments
are now available. Yet there is intensive academic
debate about whether smart beta – that is,
allocation using factors – produces alpha,
risk-adjusted performance or only beta, a premium
for bearing risk. In any case, it’s not good for the
investor who has to pay the bill.
Michael
Edesess, Ph.D., Chief Strategist of Compendium Finance &
Research Assoc at EDHEC-Risk Institute (Hong Kong)
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Resources
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Panel: Alpha & Smart
Beta… fact, fallacy or fantasy?
Our panellists debate the takeouts from
the five presentations of the morning.
Michael
Edesess, Ph.D., Chief Strategist of Compendium Finance &
Research Assoc at EDHEC-Risk Institute (Hong Kong)
Ido
Eisenberg, Portfolio Manager, J.P. Morgan Asset Management
(London)
Michael
Furey, Managing Director, Delta Research & Advisory (Brisbane)
Ian
Haas, CFA, Head of Quantitative and Directional Strategy
Research, Neuberger Berman (New York)
Matthew
Kelley, Vice President Corporate Strategy, Affiliated Managers
Group (Boston)
Robert
Lovelace, President, Capital Research & Management Co (Los
Angeles)
Rob van Bommel, MD & Portfolio Manager,
Robeco (Rotterdam) |
Resources
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Due Diligence Forum 3 |
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Debt - Global
Negative yields are not catastrophic
Negative interest rates have become prevalent across Europe and
remain low across developed markets, with many fixed income
assets now displaying an asymmetric risk profile. As volatility
in bond markets becomes more pronounced, and asset bubbles
develop, investors will need to reassess their approach to the
asset class. The dislocation across global bond markets allows
unconstrained bond investors to exploit opportunities across
relative value, yield curve and fixed income volatility.
Sebastian MacKay, Investment Director - Multi Asset Portfolio
Management, Standard Life Investments (Edinburgh) |
Resources
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Equity - Specialty
- Australian
Harvesting alpha & managing
risk via fundamental insights
Investors face five dilemmas on which judgments need to be made
with respect to: earnings, valuations, momentum, reinvestment
and sentiment. QMTV is a risk awareness framework that can allow
investors to more clearly discern the questions and factors
driving prices of stocks, sectors and asset classes. This
classification process aims to manage the buy, hold and sell
decision process through the various cycles as well as providing
a crossroad signal. Investments classified as quality, momentum,
transition or value exhibit common characteristics and risk
correlations that can hold for short or extended periods, but
eventually rotate or "cross the floor" with material share price
reactions.
James
Abela, Portfolio Manager, Fidelity Worldwide Investment (Sydney)
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Resources
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Equity - Specialty
- Infrastructure
Infrastructure investing needs a tight definition
In markets with considerable volatility and inflation risk,
investors globally are looking for defensive portfolio
solutions. But they face a dilemma – will an expected defensive
asset actually deliver defensive characteristics when required?
At the heart of defensive investing lies infrastructure assets -
typically argued as an attractive solution for investors seeking
inflation protection, reduced volatility (relative to broader
equity markets) and portfolio diversification. However, due to
broadening definitions, the experience of some Australian
investors has not always reflected the marketing claims. Indeed,
only in its purest form is infrastructure able to deliver the
defensive qualities that investors are targeting.
Andrew
Maple-Brown, Head of Global Listed Infrastructure, Maple-Brown
Abbott (Sydney)
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Resources
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Equity - Global
Factor Investing must be a strategic allocation
The literature on asset pricing distinguishes between three
sources of return: (i) exposure to market risk premium, (ii)
exposure to factor premiums and (iii) alpha, or manager skill.
The existence of the factor premiums were discovered by
academics. Haugen & Heins (1975) proved a low volatility effect,
while Basu (1977) came up with the value effect. Jegadeesh and
Titman (1993) were the first to report on the momentum effect.
Portfolios should be strategically allocated to these factor
premiums. However, by enhancing these principles further by
avoiding unrewarded risk and by avoiding going against other
factors, the risk return profile of factor investing portfolios
can be improved even further.
Rob van Bommel, MD & Portfolio Manager,
Robeco (Rotterdam) |
Resources
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Equity - Global
Beyond Borders: Follow the revenue, not the domicile
Today's investment environment calls for a truly global
perspective. Disruptive changes, from the rise in e-commerce to
the emergence of breakthrough drugs, have the potential to
transform the way we live and work around the world. Companies
driving these changes rarely limit their commercial applications
to home; they are poised to reap new profits across multiple
markets and reward investors handsomely. As more successful
businesses operate globally, country of domicile has become a
less relevant indicator of investment exposure. We are at a
crossroads: a better way to evaluate companies and portfolios is
to consider where companies do business, not where they are
headquartered. It is time to invest beyond borders.
Robert Lovelace, President, Capital
Research & Management Co (Los Angeles) |
Resources
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Due Diligence Forum 4 |
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Equity -
Specialty - Australian
At the crossroads: insist on a very active equities approach
Six years into a bull market, Australian equity values are
beginning to look stretched. But large divergences in valuations
across sectors are creating great opportunities to beat the
market. Naturally, this is impossible to achieve through a
passive approach. The smooth sailing of the last few years has
developed complacency among investors. But rougher seas ahead
will require a more active approach. It’s time to ensure that
you engage a truly active manager who can capitalise on the
current value dispersion.
Dr
Richard Whiteoak, Analyst, Allan Gray Australia (Sydney) |
Resources
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Equity -
Global
High active share ≠ good performance
Active share is an important manager evaluation tool but it does
not necessarily translate into superior returns. It is one of
several risk measures which can help assess a manager, but it
gives no indication of manager skill. High active share is often
profiled as “better” but it creates a dilemma – portfolios can
exhibit risk concentrations which may lead to volatile return
streams for investors. Low active share funds should not be
excluded from asset allocators’ tool kit. Investing in low
active share, diversified portfolios can deliver consistent
alpha without overriding the investors’ equity allocation.
Combining passive and active approaches in a low active share
solution can be an effective and efficient way of accessing
equity markets.
Ido
Eisenberg, Portfolio Manager, J.P. Morgan Asset Management
(London)
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Multi-asset
Risk crossroad: Weather markets with multiple risk strategies
91% of investors surveyed by SSGA were very/somewhat confident
in their portfolio’s ability to weather a major market
correction. Yet there’s a conflict when only 16% agree strongly
that they have the right mix of tools in place to measure and
predict market risk. So what is truly more important to
investors - losing less or making more? While 36% of investors
say they are ‘reviewing their need for downside protection’,
only 8% are currently implementing increased protection. Yet
there are many strategies available to manage risk in portfolios
- diversification, low volatility equities, defensive asset
classes, option protection and risk overlays – each with its own
merits and which can work together in managing risk in
portfolios.
Jon
Shead, Head of Portfolio Strategists Asia Pacific, State Street
Global Advisers (Sydney)
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Resources
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Alternatives
Liquid Alts – a better Alternative
Supported by unprecedented monetary policy stimulus, equity and
fixed income markets have outperformed with historically low
levels of volatility post-crisis. Going forward, there are
headwinds for equity and fixed income markets, however the
outlook for alpha generation from many alternative strategies
remains robust. Now is an attractive point in the cycle to add,
or increase exposure to alternative strategies. While the rapid
growth of the liquid alternatives universe has provided
investors with more choices than ever in this regard, investors
must carefully consider investment implementation issues
including the diversity of alpha sources, manager skill, and
fees and expenses.
Ian
Haas, CFA, Head of Quantitative and Directional Strategy
Research, Neuberger Berman (New York) |
Resources
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Strategies
Use an institutional approach to manage downside risk
As an industry facing a crossroads of demographics, low/volatile
returns and geo-political upheaval, developing appropriate
investment strategies for clients has never been so challenging.
Faced with a risk tolerance paradox, many investors are
increasingly taking more risk to generate the returns necessary
to fund a lengthy retirement. The investment industry has
responded through the development of strategies and solutions to
manage risk, beyond diversification. These strategies have a
particular focus on maintaining access to growth while managing
exposure to downside risks. Portfolio construction specialists
face a new set of challenges. What matters is the ability to
deliver a robust and predictable outcome. This requires
institutional capabilities that can avoid the use of expensive
instruments such as options, don’t charge performance fees and
are not subject to the whims of portfolio managers and their
ability to make the right bet. Having been tested through past
crises, these approaches provide confidence that the right
outcome will be delivered when it is most needed.
Don Hamson, Managing Director, Plato Investment Management
(Sydney)
Wade Matterson, Principal & Senior
Consultant, Milliman (Sydney)
- brought to you by Sanlam/Colonial First
State, Plato/Pinnacle, & Milliman
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Resources
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Critical Issues Forum 8 |
At the crossroads...
Retirement income certainty - is it an oxymoron? |
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3 strategies to manage
retirement income uncertainty
The danger that “sequence of return risk” can
devastate a retirement portfolio is both
increasingly recognised and frequently
misunderstood. Three concrete, research-driven
strategies can help manage it – from a safe
withdrawal rate approach, asset allocation
strategies using buckets and glidepaths, and the
“guardrails” approach for dynamic spending.
Michael
Kitces, Partner & Head of Research, Pinnacle Advisory
(Washington, DC)
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Resources
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Australians’ vision of
retirement is both promising & worrying
As Australians’ financial needs in retirement
evolve, it creates challenges for governments,
product providers, researchers, financial advisers
and investors alike. A recent survey of 1000
Australian investors highlights that while most
expect to maintain their current standard of living
in retirement, many are concerned about the
potential impact of legislative change. Despite a
relative lack of retirement confidence and too few
appropriate solutions to support retirement
aspirations, a key observation is the need for and
value of advice. Those individuals who are advised
have greater confidence in their retirement
readiness and a heightened awareness of the
retirement strategies and solutions available to
them.
Dan
Farley, CIO Investment Solutions, State Street Global Advisors
(Boston)
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Critical Issues Forum 9 |
At the crossroads… Decision making under uncertainty
- sensible or senseless? |
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Will they still need you,
will they still know you, when they're 64?
Cognitive functioning declines as we age,
affecting financial decision making. Practitioners
need an increased awareness about issues relating to
aging and cognitive decline.
Dr Joanne, Snr Lecturer and Program Director, UNSW (Sydney)
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Critical Issues Forum 10 |
At the crossroads... |
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The Great Debate
This was delegates' chance to ask questions of our
eclectic Panel - a politician, a pastor, a portfolio
manager, a practitioner, a provocateur, and a 'preneur
- moderated by our Publisher. Questions were
pre-selected by our Publisher.
The Portfolio Manager -
Kate Howitt, Portfolio Manager, Fidelity
Worldwide Investment (Sydney)
The Provocateur -
Michael
Kitces, Partner & Head of Research, Pinnacle Advisory
(Washington, DC)
The Pastor -
Rev Graham Long, CEO, The Wayside Chapel
(Sydney)
The Practitioner -
Kate McCallum, Director & Wealth Adviser, Multiforte Financial
Services (Sydney)
The 'Preneur -
Naomi
Simson, Founding Director, RedBalloon
The Politician -
Hon. Wayne Swan, MP, Member for Lilley, Queensland (Brisbane)
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A few words from the
Publisher
Graham
Rich, Managing Partner & Publisher, PortfolioConstruction Forum
(Sydney)
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